Chicago, IL – August 31, 2010 – Stocks in this week’s article include Ballantyne Strong, Inc. (AMEX: BTN), Herbalife Ltd. (NYSE: HLF), iGATE Corp. (NASDAQ: IGTE), Quaker Chemical Corp. (NYSE: KWR) and Compania Cervecerias Unidas S.A. (NYSE: CCU). Kevin Matras looks at the powerful combination of Sales Growth and Increasing Profit Margins.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
While everybody understands sales, margins might bring up a few question marks. So let’s start at the beginning: first and foremost, sales are THE most important thing to a company. Everything else stems from that. Without sales, there really wouldn’t be anything else to analyze. And Sales Growth numbers show you how that company is growing.
However, just because sales are increasing doesn’t always mean that profits are increasing too. Sales at the expense of profits does not work. So paying attention to Profit Margins is the next thing we’re going to want to look at.
Margin is simply a ratio and the calculation is: Net Income divided by Sales
So if a company’s margin is 15% for instance, that means the company’s net income is 15 cents for every $1 of sales it makes. But if a company’s expenses are growing faster than their sales, this will reduce their margins.
In general, a company with increasing margins is becoming more profitable and is better managed, i.e., their costs are under control.
So definitely look at a company’s sales. And of course, look at their earnings. But take a look at their profit margins as well. Are they going up or down? In other words, are they making more on each dollar of sales or less? This is important stuff to know, and could make the difference between investors buying a company’s earnings announcement, or selling it.
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BALLANTYNE STRG (BTN): Free Stock Analysis Report
CERV UNIDAS-ADR (CCU): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis Report
IGATE CORP (IGTE): Free Stock Analysis Report
QUAKER CHEMICAL (KWR): Free Stock Analysis Report
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